DATE: February 20, 2015
TO: Board of Mayor and Aldermen
FROM: Eric Stuckey, City Administrator
SUBJECT:
title
Consideration of Resolution 2015-16, A Resolution to Amend the City of Franklin Employees' Pension Plan (02/24/15 WS)
body
Purpose
The purpose of this memorandum is to provide information to the Franklin Board of Mayor and Aldermen (BOMA) concerning the First Amendment to the Employees' Pension Plan
Background
The City of Franklin is required to submit its Employees' Pension Plan document for periodic review by the Internal Revenue Service (IRS). This review by the IRS is to ascertain compliance with existing law.
During the last review process, a number of questions arose regarding employee elections in the "cash balance" portion of the Plan. The staff at Evans Petree Law Firm, our specialized pension counsel, engaged with the IRS and developed a set of clarifying statements that would alleviate any concern on the part of the IRS about not-conforming elections. An amendment to the plan, attached to this memo, incorporates the changes necessary to achieve full compliance with IRS interpretation of the Plan. Most of the amendments are clarifying statements rather than actual changes to the terms of the plan.
The section changes are as follows:
Section 2.4 of the plan, to clarify that the election by a participant to opt out of plan participation is irrevocable.
Section 3.1(c)(1)(iii), deleting the provision for additional contributions by the employer, since these provisions have never been used.
Section 3.1(c)(4), to clarify that the employee designation of any mandatory contribution amount is an irrevocable designation.
Section 4.7(a), to clarify that the required provisions of Section 401(a)(9) regarding timing of distributions are incorporated by reference, as permitted by law.
Section 8.1(a), confirming that the employee designation of amounts contributed to a cash balance account is an irrevocable designation. A provision defining annual additions in accordance with the regulations as related to post-tax cash balance accounts.
Section 8.2, clarifying permissible reversions to the City as employer per regulations.
In addition to the clarifying statements required by the IRS for Plan approval, our pension counsel has identified sections of the Plan that do not correlate with current law. Those sections relate to Qualified Domestic Relations Orders, which are not required by Tennessee and federal pension law. Counsel recommends that those sections be deleted, as listed below:
Section 3.1(c)(1)(iii) of the Plan shall be deleted in its entirety; similarly, Section 8.1(c) shall be deleted in its entirety.
Section 11.4 of the Plan shall be amended by the deletion of the initial phrase "Except as provided
in Section 6.1," such that the Section begins "No benefit payable under the Plan shall be subject to anticipationÂ…"
Financial Impact
There is no discernable financial impact to the City resulting from the recommended changes.
Recommendation
Staff recommends adoption of the Resolution and the Amendment clarifying the City of Franklin Employee Pension Plan.